[powayseller]

Farls, he told me he’s involved in 8 deals right now, and is turning away business. His first 2 years in RE were slow, and he is now getting busy, as his website is finally generating lots of leads. I know you can look up his sales, so why are you asking me? You can look this up yourself.

What I like about him is that he knows how to work the system, how to take advantage of the rising inventory.

I bet there are realtors out there who have 20x the real estate sales experience and sales of Bob, who haven’t figured out that internet appeal matters more than curb appeal, that you don’t let yourself fall in love with just one house, and that you write up 4 offers with 24-hour windows before you submit your first offer so you have negotiating power, and can walk. He never carries a contract with him in the car.

I put all this out there to help you and sdrealtor and other realtors who visit this forum. That’s why I suggested you talk to him. He’s a mentor type of guy, and he has no secrets. He likes to help people.

[powayseller]

Jim, I don’t buy into any of the education lobby. I despise them, and their lies. I go by what I see at my kids’ schools. Poway is supposed to be one of the best school districts in the County, and we have no PE, music, or art lessons, except what is paid by the PTA and private parent fundraising. Our entire computer lab is from money raised at a parent silent auction. The middle school doesn’t have a science lab. The band instruments are in disrepair. And until recently, when Prop U was finally passed, our schools looked like they were in a ghetto. Our school has music taught be a parent after school, art program and materials purchased by PTA. Our kiln, clay, and paints are donated. The PE teacher and computer lab teacher are funded by the PTA. What happens to a school that doesn’t have an active PTA, or that can’t afford these programs?

In San Diego, only parents who can afford to add to the public school budget, will get PE, art, music for their kids.

Oh, and don’t expect your kids to go to the library before or after school, because the librarian is paid only 30 hours per week, so the library is open only during school hours. Since most homework must be researched on the internet and typed, all kids need a computer at home. Don’t count on the computer lab at the middle school, either, because there is 1 computer for every 500 kids.

The middle school was built for 600 kids,not 850, so the 6th graders don’t get lockers and have to carry 20 lb. backpacks around all day. Some parents donated canopies, so they could eat in the shade, since the cafeteria is only large enough for 600 kids.

I could go on and on. Obviously you don’t have any kids in public school, or you wouldn’t have made such an erroneous statement that our school are adequately funded.

Maybe the education money goes to administration. It sure isn’t getting to the classroom. Either we’re seriously underfunded or very wasteful in admin.

[powayseller]

What would be the financial commitment of someone who bought a condo at VantagePoint? How much is the deposit, and how much do they forfeit if they cancel the purchase? Can the builder decide to cancel the project, due to lack of interest or fear of losing money? If VantagePoint is only 50% sold, how will they sell the remaining 50% in a declining overbuilt market? Maybe it’s better to just stop the project in its tracks, before construction even starts. They are in the excavation phase.

[powayseller]

To understand the RE market, you need the contact with a realtor who is in the market. When I said I would go to Bob, I meant as a consultant. I would pay him a fee for the advice on the market conditions.

You seem interested in the way Bob does his business. I am sure he would love to share it all with you. Why don’t you just e-mail or call him, and you can get all the other questions anwered.

Schahrzad

[powayseller]

Thanks for the link. I browsed through this report, and found the following conclusions, which diverge from those held on this board.

The report uses data through 2003 and 2004, so it is about 1-2 years old. Why are they not using more recent data.

I think the link above is from the previous report, because the UT summarizes the adjustable loan findings from the report, and the link doesn’t have anything about adjustable loans.

Today’s online U-T front page has the headline: Equity Should Remain Stable.
Southern California’s housing boom is running out of steam, but the slowing pace of sales won’t erode the huge gains in equity that many homeowners have realized in recent years, says a report by Harvard University.
Most people will believe this Harvard study, based on the name Harvard. The few people who actually read the article will be educated to learn that economists from the California Economic Forecast and moodys’.com predict falling prices, and that the San Diego median price FELL from $518K to $505K in 7 months.

Now that I realize I just read the old version of the report…. oh well, on we go. These are the assumptions made in the 2005 Harvard report. Have fun.

1. Rising land ordinance, entitlement fees, and zoning restrictions are legitimately driving up home prices in the coastal cities.

2. Speculators have no role in causing higher prices, since they make up less than 11% of purchases, a figure too small to have an impact on prices. The data comes from Freddie Mac, which tracks how long homes are held. So, homes held for less than 2 years edged up from 16% to 20% from 1998 to 2003.

I would question how many investors even get Freddie Mac loans: don’t most investors get the 100% financing loans, or buy in bubblicious cities where mortgages exceed the conforming limit?

To get an accurate figure of speculators, you’d need to check the tax rolls and count the number of people whose addresses are not the same as the property address or who don’t claim a homestead exemption.

3. Although rents diverge from housing prices, this is a justified and not speculative divergence, because “households make housing choices based less on today’s rents and prices than on their expected direction. The continued growth in homeownership indicates that most people still believe that rents and house prices will increase enough over time to justify buying. This expectation, and not classic speculative behavior, largely accounts for the increase in the house price/income growth mismatch”.

These authors legitimize speculation and the ponzi housing scheme, because homeowners as a group could not be accused of speculation, therefore speculation does not exist. This passes for Harvard logic?

The outlook for 2005 (the link was for a 2004 study), is that appreciation will slow if interest rates slow, and can be put under pressure if interest rates rise.

Household growth will create the need for 20 million NEW homes in the next 10 years. Did you say this study was funded by builders?

Fast foward to 2006, and I’d love to ask them why builder stocks are way down. How did they overestimate the demand for new homes? We went from a need for 20 million new homes to having too many and causing price drops?

Why didn’t they mention exotic loans? Not one word in that report about 0% down, adjusting mortgages, no doc loans, teaser rates, mortgage equity withdrawal.

My guess is hese guys can be found at the beach having a big keg party with the UCLA Anderson Forecast, where you will find them with their head stuck in the sand and their butts up in the air, getting their a** kicked by a housewife.

[powayseller]

It happened a few times. What matters is the depth and length of the inversion. So it’s not the fact that it happened, but a sustained economic condition which brings it about.

This time the reversal is due to a different factor, namely the foreign central banks who have hundreds of millions of dollars they need to invest. They got those dollars when they exchanged their manufacturers’ dollars for yen, yuan, baht, etc. They don’t want to convert the dollar into their own currency because that would make it appreciate, so they invest it back in the US.

This glut of dollar looking for Treasury debt raises demand, pushing down yields.

So, the more we import, the lower our long term bonds get.

The last few months, the trend is for imports to become a little less. So eventually the bond curve will normalize, and then we will see 30 year mortgages go up.

[powayseller]

Ok, that makes sense.

But how does a higher interest rate provide insurance against default? In my view, it raises the risk of default.

If they default, the 2nd deedholder takes the loss. With prices already down 10% in San Diego, the 2nd deedholders have only approximately a 10% equity cushion.

But the second deed is not hedged/insured as the PMI deed would be.

[powayseller]

With the housing industry as the policy advisory board members, I’m surprised the Harvard group isn’t predicting a soft landing.

Who’s the policy advisory board for the UCLA Anderson Forecast?

[powayseller]

If the Fed allows the dollar to fall, we’ll have more exports, but imports will become more expensive, raising inflation even more. We are a consumer society, so keeping a lid on prices means keeping the dollar strong to keep down import prices.

A strong dollar is also needed to keep investors buying our bonds. If bond investors believe we have a strong dollar policy, they will buy our Treasury notes.

I think the Fed must raise rates again.

I really get a kick out of Ben. He’s trying so hard to be more transparent, so he wants to be upfront and acknowledge that he is serious about fighting inflation. But his words come out wrong.

He says, “We’re worried about inflation”, to mean he is taking it seriously and give the markets an inkling it’s enough of an issue to warrant another rise in Fed funds. Instead, the markets think he is worried, concerned, out of control of it. Inflation is raging, the thinking goes, so the markets sell off.

“Earlier this week, Mr Bernanke said that the central bank was worried about the rate of inflation, prompting a global sell-off in equities as investors worried that interest rates would have to rise to keep a lid on price growth.”

A global sell-off, just because Ben is worried about inflation. I think it’s about time he worried. Inflation has been raging for years. Why start worrying now? Why didn’t he worry last year?

[powayseller]

I am certain the government will devalue the dollar. It is the best alternative to pay down the deficit and give us a shot at increasing exports.

The government doesn’t care if individual families are hurt in bankruptcy or lose their homes. They are concerned with price stability and inflation.

As long as the country as a whole can keep paying the bills, so what if a few million people are financially insolvent?

They also realize that the debt game cannot go on forever. This excess liquidity must be wiped out.

Check out the Chart II in Bill Gross (PIMCO) article, which shows a parabolic rise in debt, greater than at any time in US history, greater than during the debt bubble leading to the Depression. He calls our the Finance-based Economy. Remember when we were the manufacturing economy, then the service economy? Now we are reduced to the finance economy. We finance our debt.

As someone wrote earlier, if we truly are the most productive nation on earth, why do we have the most debt? We are unproductive. We are consumers, who consume more than we make.

You can try all kinds of financial and monetary supply shenanigans, but you must ultimately face yourself and you will see that you consume far more than you make and pay for it with borrowed money. When the gig is up, where will you be?

[powayseller]

I didn’t say that rental units have record vacancies. I said record vacanies. That’s homes. SFH.

I don’t know how rental rates are on SFH. Apartment rents went up from spring 05 to fall 05 and have decline since. Check the last UT article. The online version missed the graph. The prices now are only slightly above the spring 05 prices. Why did they drop since fall? Article didn’t say.

This is for the person who thinks our wage increase can save housing. Do you really think employers will raise wages just so we can buy houses.

If you follow that logic, we would never have recessions, all we need to do is raise wages and all is fixed.

What do the homes on the market do while we wait for the wages to go up sometime in the future, wait for that day? The ones that sell at lower prices set new comps for future sales.

Future wage increases can set the stage for a potential recovery in the future but for now the prices will go down as long as our current supply/demand situation remains.

You also need to look at the employment scenario. Do we have the types of jobs in San Diego that are likely to see 50% wage increases? Movie making, biotech, nuclear power plant production, alternative energy R&D, Mayo Clinics/best medical centers in the country, auto manufacturers with booming market share? NOPE! We are a low-wage city!

I pulled this data together last winter. From the Employment Development Department, the SD County snapshot. The 3 larges growth sectors are construction, retail, and government. Small hope for wage gains with jobs like that!

Since 2000, SD Cty gained the following numbers of jobs
1) 17,800 in Natural Resources, Mining, Construction.
It turns out that 17,700 of those jobs are in construction. 12.000 of those jobs are in “specialty trade”, and I assume that would be granite fabricators, plumbers, and those who build and remodel homes.
2) 11,900 in Trade, Transportation, and Utilities. Now ask to break it down! It turns out that 10,500 are in retail, mainly due to consumers pulling money out of their homes to go shopping. It would have been great if this growth would have been in utiltiies or transportation, or in investment in new infrastructure, but unfortunately it is not.
3) 8,100 government jobs, with 7600 of them being local.
Those are the 3 biggest growth sectors for SD County since 2000.

A last point: the bulls say that each asset bubble is justified, that the fundamentals will catch up. zk, do you remember during the technology stock bubble, the permabulls said the earnings don’t matter, or that they will catch up. The companies have so much promise, the earnings will catch up to match the stock price. Why do people not learn? Asset bubbles pop on the nominal side.

This is an important point that Rich might want to address. Has there ever been an asset bubble in recorded history that violated this principle? Has any asset bubble popped by the price of the asset staying flat, while the fundamentals caught up?

Schahrzad Berkland

[powayseller]

Downtown condos,houses, apartments, all over town.

With 44K people leaving annually, you’d have about 15K households per year leaving.

Don’t you have any vacancies on your street? Maybe we need a survey on this forum. How many rentals, and how many vacancies are on your street?

I have 6 rentals on my street that I know of, and I’ve only met 12 of the neighbors. So half the people I met are renting.

Two homes in my neighborhood are for sale, and they are vacant. One belonged to a deceased man, and the other to a landlord whose tenants just moved out. Neither of these is due to a family leaving the area.

sdrealtor may know where all these vacancies are, as it sounds you are looking for a cluster or pattern?

[powayseller]

My contractor/architect had put 1/300 on the blueprints, then crossed it out and put 1/150, presumably when he submitted the plans. That’s why I was so mad at him when he didn’t tell the roofer how much to put on, and the roofer only put in 7 O’Hagen vents. Byron Holmes, the contractor (DO NOT USE HIM) refused to apologize, accept responsibility.

After I got the inspector’s report, I called Byron 5 times in 1 week, asking him about this, and assuming the inspector made a mistake. No calls back. I contacted the roofer, Rancho Roofing, who quickly wanted to correct the mistake.

I wrote a letter of complaint to the CSLB, and they investigated and found Byron innocent, since he had not charged me for the missing vents. So a builder can skip parts of the building process and that is legal and okay, as long as he didn’t charge you for that. With that logic, I should be grateful if he would have eliminated the drywall, paint, and insulation, because I could have saved a ton without all those things. Ridiculous logic!

Mike Kenny of Kenny Heating and A/C told me the roofer is responsible. I was mad at Byron, because he was mainly an armchair contractor, and if he would have come out to the job site once in a while, he would have noticed the missing vents. I also thought he should have said, “Oh my gosh, what a horrible mistake. Let’s fix it, how do you feel about us splitting the costs?”

I was willing to pay for the vents to be put in, but felt deceived by Byron. He was content to let me live my entire life in a house that had extra insulation, upgraded A/C, and where we’d retrofitted with $3K of reflective attic insulation, and it was all undone by not having the vents.

Learn from my mistake: when building a house, hire an independent inspector at all stages. Do NOT count on the County inspector. I was warned about this on a building forum, but defended my contractor who was a friend and had built the homes of several of my friends. I was sure he wouldn’t do anything wrong. I defended the Lakeside Planning Department and inspectors, who are actually too lazy to ever go up on the roof, and so overworked that they skip lots of steps. I went down to the inspection office and have never seen a group of people with so little fire in their guts. Complacent, slow-moving, not caring….

That was the only mistake we found on the house. Oh, the tile setter didn’t use the sheet you’re supposed to put down on concrete to avoid the tile cracking when concrete settles. I didn’t even know to ask for that. And he didn’t put caulking between the tile floor and baseboard.

[powayseller]

I hope everyone avoid buying homes in landslide zones and flood plains, and has insurance for earthquakes.

After the Cedar fire, I was shocked at how many people were underinsured. They cheated on the home value to their agent, to keep the premiums low, and then cried about unfair insurance laws when they needed the company to cover their loss.

This article is a reminder that natural disasters do happen. Make sure your insurance is in order.

I always carried earthquake insurance. I had my terrain checked out, and only then eliminated flood and landslide insurance. Our house was on granite, and at the top of a granite hill. So we were exempt from those accidents.

My heart does go out to earthquake and landslide victims in poor countries, because those people really couldn’t get the insurance.

[powayseller]

Proposition 13, passed by voters in 1987, caps the annual property tax increase to 1-3%, or something like that. It’s fair to older people, who can count on a steady property tax increase, and won’t get boosted out of their home because their fixed income can’t cover the rising property taxes.

But it’s unfair to new buyers, and it has caused CA schools to have one of the lowest fundings in the nation. Our schools are a mess because of this.

Warren Buffett has criticized this Prop too. He says he pays less in taxes on his $3 mill home in Laguna Niguel than his $100K house in Omaha, NE. Taxes in Omaha, NE are 3%, and here they are close to 1%.

[Author]

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